Q4 2020 Tripadvisor Inc Earnings Call
Good morning, and welcome to Tripadvisor as fourth quarter and full year 2020 earnings Conference call. As a reminder, today's conference call is being recorded.
At this time I would like to turn the conference call over to Tripadvisor as Vice President of Investor.
Mr will Lyons. Please go ahead.
Thanks, Liz and good morning, everyone and welcome to our call. Joining me today is our CEO, Steve Kaufer, and our CFO Ernst tonnage and.
Last night after market close we distributed and filed our fourth quarter and full year 'twenty and 'twenty earnings release and made available our shareholder letter on our Investor Relations website.
And the release released you will find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed on this call on our IR site, you will find supplemental financial information, which includes reconciliations of certain non-GAAP financial measures discussed on this call as well as other metrics also on the comments regarding costs and cost savings levels referenced on this call do not considered depreciation.
And the amortization restructuring and other related reorganization costs or stock based compensation.
Before we begin I'd like to remind you that this call may contain estimates and other forward looking statements that represent management's views as of today February 19th 2000 22021.
Tripadvisor disclaims any obligation to update these.
And will reflect future events or circumstances, please refer to our earnings release as well as our filings with the SEC for information concerning factors that could cause actual results to differ materially from these forward looking statements and.
With that I'll pass the call to Steve.
Thank you will and good morning, everyone.
2020 was a challenging year and fund.
Statements will be optimistic and <unk>.
<unk> curves have been declining that seems are being distributed and from what we see on our site and healing and our research travelers are all eager to get back out and explore the world.
As we described in our shareholder letter you made a bunch of tough decisions last year.
So shored up our liquidity.
To work, helping customers make the best of the current situation with initiatives like travel safe.
And most importantly from my perspective, you prepared tripadvisor to emerge as a stronger more focused company when travel comes back.
And I'm really proud of what we accomplished we soft launched our new tripadvisor.
A bunch of plus product in record time.
<unk> focus on making the core experiences trip the bus or more engaging personal for all travelers and.
And we've got some great teams and players growing our exciting restaurants and attraction businesses.
We enter 2021 excited about and.
And what role that Tripadvisor complains and recovery.
And he spoke upon our historical reputation as a trusted guidance platform, but also because of our new initiatives that are ready to help travelers take amazing trips.
Let me also take a minute to thank everyone and trip who their commitment during this past year.
No that your hard work is what has positioned our company to <unk>.
Hundreds of millions of travelers get back out on that road again, and all of that makes 2021 looks like a pretty exciting year for us Ernst.
Let me turn it over to you for additional thoughts.
Thank you, Steve and good morning, everyone, our fourth quarter mirrored most of the financial themes of our previous 2020 earnings.
And as calls that we've done less in our control of course has been how Covid has continued to impact revenue with all of our business lines and very much impacted again in Q4, but uneven stories by geography and type of business for instance, our restaurants revenue performed very strongly in Q3 as most of European restaurants will open and then took a step back again in Q4.
<unk> with most of Europe locking down and.
Restaurants might be among the first revenue lines will actually benefit again, when youre reopens again.
Consistent financial themes that have been more and our control are driving significant cost savings and ensuring a solid liquidity position and laying the groundwork for compelling unprofitable growth when the pandemic finally subsides.
On the cost savings side.
We more than achieved our target of $200 million on fixed and discretionary savings in 2020 versus 2019 and.
And we entered 2021 and more efficient and leaner company.
Of course, the reduction and variable cost mostly performance based marketing was actually significantly larger.
And $200 million, but most of that expense will return, but the $200 million of savings. We have achieved were very proud to have achieved.
And we think the majority of that we will be able to keep those savings going forward.
I want to point out one thing and our Q4 on our financial results.
Is that the majority of the sequential.
<unk> expense increase in Q4 versus Q3 was due to an increase and our full year compensation expense as such and $12 million of that Q4 expense is not indicative of the underlying quarterly run rate that we take with us into 2021.
While we anticipate prudently increasing investments.
As the pandemic eases and revenue and demand comes back.
As I said, we expect that the majority of these 2020 fixed cost savings will persist in 2021 and beyond and.
And our fundamentally leaner cost structure positions us for operating leverage better margins as revenue returns.
We've also strengthened our liquidity position again in Q4, we renegotiated our credit facility to extend the maturity to May 2024, and to extend our leverage covenant holiday for part of the part of the facility and both of these have provided us with increased financial flexibility with over $400 million of cash at the end of December.
As well as $500 million of additional available borrowing capacity under our credit facility. We believe we are very well capitalized.
We have been throughout this pandemic and are right now focused on driving customer value across our diverse revenue lines and we're getting ready to catch the wave when travel and inevitably.
And she's back so in summary, despite uneven travel recovery trends and Q4 2020 and in early 2021. The current backdrop makes us increasingly optimistic that travel and could come roaring back as early as the second half of the year.
More importantly, we have positioned the company well in terms of future growth potential and margins.
With that and we will open it up for your questions.
Ladies and gentlemen, if you'd like to ask a question at this time. Please press the star and the number one key on your Touchtone telephone.
To withdraw your question press the pound key.
And the interest of time, we ask that you limit yourself to one question and one follow up.
Our first question comes from the line up and Lloyd Wamsley with Deutsche Bank.
Thanks, guys a couple if I can first.
Steve could you give us a sense for where you are in terms of establishing key relationships with otas hotels other other kind of companies.
Directly buildup supply of kind of discounts and perks for Tripadvisor plots and what is the road map for adding new benefits for subscribers of Tripadvisor, plus and then second.
Second one would just be you know.
Can you give us a sense of of how the unit economics work how.
Providing the discounts.
Hum Who's funding those and and you know what the puts and takes are for you guys for a hotel supplier or R. O T a for participating and that thanks.
Certainly thanks.
Lloyd excellent question so.
You are kind of on it when we talked about Tripadvisor plus it really comes to the proverbial win win win.
For the traveler Theyre getting these amazing discounts the perps, it's something thats turning their trip into Something's Fabulous.
And when it comes to Tripadvisor, we're making some money on.
We will subscription and building up what we hope to be a wonderful recurring revenue stream, where youre hotelier and that's really where your question started.
I will change we are changing the model whereby folks like Tripadvisor would ordinarily take the commission on the hotel sale.
And we're going direct to the hotel and say instead of paying us, let's offer that discount directly to the consumer so if you might've been paying.
X percentage to your other distribution channel that's instead after that same percentage, but as the discount tripadvisor passes it directly along.
That plus subscriber plus subscribed will get the deal now when you add the value of the park.
And you add the value of the discount it becomes something pretty compelling for the consumer back to that original win.
And something that's well within the availability of the hoteliers.
To offer that package at the same or better travel distribution cost as they go through for other channels and.
So the wind for the hoteliers they get access to this club on Tripadvisor, They get preferred placement on the Tripadvisor sites.
With visibility for their property they get a guess, that's perhaps higher and perhaps likely to stay longer and the.
Distribution costs, that's the same as lower from the same or lower as many of their other channels.
The unit costs, if you will.
Plus from Tripadvisor as prospect.
Active.
We have practically speaking no cost of goods on us delivering on the service we have some level of customer support and that's fine.
But we are.
And make our revenue on the trends on the.
Subscription fee for Tripadvisor.
So and then the next time somebody comes back to Tripadvisor, because they remember they might be booking and attraction and will make decent margin on there even after passing the discount that too.
After passing and discount that the consumer travelers will also come back to trip clustered plan other parts.
Plaza, and again, making us a preferred place for those subscribers to start their travel planning all of which building into our repeat story.
To answer your other question on our roadmap for new benefits for subscribers, we expect to be launching.
And we launch more.
And so that fleet throughout the U S will be adding some additional benefits that will announce at that time and we can see a very straightforward plan over the course of this year and next to add additional benefits that helps make people that helps with traveler turn travelers into savvy travelers. So again.
Will we start with hotels and experiences because those are things you can book on our site today.
Valuable and the amount of savings we can differentiate on the perks.
But we're also going well beyond that in the travel category. Our goal is nothing less than building and affordable travel subscription product.
That pretty.
Pretty much everyone would love to be a part of travelers.
Because it turns them into better travelers.
No matter, where they're going and.
And.
And I don't want to repeat myself, but we think it's going to be a great offering.
John.
Thanks. Good luck guys very very interesting product are excited to see it unfold.
Thank you very much.
Your next question comes from Richard Clarke with Bernstein.
Hey, good morning, Thanks, very much for taking my questions. Just a question to start with on your guidance into Q.
One about revenue flat to four competitors pre pandemic that would make them into Q and.
And more than in Q4, maybe you could break that down between different geographies different components. What are you seeing whats getting worse.
Better and.
And then.
And second follow up question around your.
And additional 12 months.
John.
Comments, what is nature of that was that just sort of bring up the bonus pool full year.
And at that one off costs come from.
Richard I will take those questions. Thank you for those questions.
About the first quarter, yes, there are a number of things that go into Q4 and Q1 different revenue streams Europe is obviously a big.
Impact on our business today, the Lockdowns in Europe.
And that has impacted our European business broadly.
Our fourth business the rest.
Strong business of course is very skewed to to Europe, So thats, making an impact.
And the Lockdown and progressed throughout Q4, and Europe, and we expect to take that into.
The first quarter and Thats, where the what's the basis for what we provided as guidance for Q1.
I said that we also pointed out that February.
First is a marked uptick in in the quarter and so we have seen at least some improving fundamentals and are in the business coming up again.
And that bodes well for for hopefully the rest of the quarter and.
For the first half and more broadly.
But this is the.
As the Lockdown and Europe in particular is behind.
The cautious outlook for the for the first quarter.
The second question.
<unk> million dollars of additional cost in Q.
In Q4 that we said.
And we should be taken out of the run rates. If you do your analysis.
Yes that was and.
And additional.
Expense.
Expense and compensation that was indeed based off of bonuses we accrued.
About the year.
A low bonus.
Percentage and.
And at the end of the year.
We decided with our board to up that it's still well below 100%.
<unk> here.
But higher than we originally accrued for it and so as we pointed out although that all hits. Our Q4, P&L really you should take out $12 million of that if you want to.
Take our run rate for the quarter and start to project that into the following year.
That's very clear thanks very much.
Your next question comes from David Cohen with Truth Securities.
Alright, Thanks, a lot.
Maybe a quick follow up on on trip plus.
And then maybe I'll start with a clarification so.
If a participating and hotel and Thats.
Giving folks to the members.
For the year is booked through and Ot a.
Would be.
Will the travelers still receive the perks or is it on on your indirect bookings and then can you just maybe give us a sense of the.
And of the beta and what percentage of the traffic and.
And is getting exports to this and.
How should.
We expect that to grow and progresses.
Certainly thanks and have that Steve will take that.
And so to your first question no all of the perks and discounts are available to travelers when they subscribe to Tripadvisor plus first.
And then of course, they were not of course I suppose but then they do have to complete the booking on tripadvisor.
We have a very.
Solid bookings flow, we will still your credit cards will make it easy and we're building that repeat behavior, where.
You come in what we call that no brainer.
And a moment where I.
This hotel for your five nights day has a $250 discount which is close to our average at this point you then take a $99 subscription fee youre still travelers still saving meaningful dollars right now and.
And they booked out through the Tripadvisor booking flow travel that comes back I think.
Get a similar discount the next trip, they're gonna take perhaps and of course, they've already paid that piece. So.
It's all dropped into savings whether that traveler, then chooses to spend net savings on.
Amazing new experiences.
And if they found on our site or anything else that they're looking for that's up to them.
So the question on but beta rollout, yes, we're still in pretty early days. We're excited by the fact that it's out we're testing we're learning it and tell them kind of U S.
<unk>.
Audience only at this point and we've shared that we will be rolling it out to the rest of our U S traffic in the first half of the year.
And then we go beyond and.
Other English markets.
And at some point after that.
We are.
Very excited about the opportunity that trip represents.
Talk.
About having 160 million times, when we looked at our 2019 numbers, where travelers were expressing interest.
Interest in looking at a spin.
Property, such that they were using our meta auction and clicking off to an OTA or supplier direct.
160 million times, we think of it as shots on goal of 160 million and opportunities for.
Tripadvisor with Tripadvisor plus to say hey on.
A lot.
<unk> properties, we have and amazing discount and a per that's gonna make you the customer a savvy traveler and it's part of a tripadvisor plus subscription please come and subscribe.
Hi, make your money back or close to it and the very first purchase and get the benefits for an entire year.
That savings can go into making a.
Out of these scripts that savings can go into your bank.
And and.
And the audience is folks who are not only taking this one trip, but I'll need to come back to tripadvisor over and over again over the course of the year. So it doesn't take a high conversion percentage for.
And when you when your denominator.
Bedroom, and 60 million and opportunities to be able to buy.
And the set of audience, that's quite excited about this product.
Got it.
A quick follow up and kind of and as you as.
And as you've kind of planned.
And for recovery there.
And it takes.
Or something that goes on.
And any plans of increasing your AD spending as we.
And I heard of that have you been looking at the cap on their grants and things like that how should we be thinking about guidance.
So I would say.
We have so much traffic on our site today.
And we don't feel a need to reach out to.
Market space on on a.
Non owned or paid channels of course, our paid marketing a regular performance marketing will grow.
As traffic return so it's really just a function of Bart.
And.
And kind of standard operating procedure when it relates to plus specifically again I talked about that 100 plus million number of people who are already potentially plus.
Clients, and we don't need to reach out.
Tripadvisor to to talk to those folks.
For instance, you want add anything.
No I think that's a that's correct Steve outside of the business as we've said before is the marketing expenses, mostly going to be variable with revenue.
And that's true.
Thank you both.
Your next question comes from Tom White with D. A Davidson.
Oh, great. Thanks for taking my question too.
Two if I may.
Thanks for the color on on a trip plus there Steve.
It sounds like.
Sorry.
The platform is kind of heading down the road of becoming more.
On the transactional I guess it might be just curious to kind of hear your thoughts on them.
And maybe how your initial push into making.
Tripadvisor more of a of a.
On a transactional site.
And with it was back from the instant book and days, maybe you kind of what the big learnings from that were and how that has been informed.
The rollout here and then maybe also just an update on where you guys stand in terms of leveraging customer data and somebody guys have talked about prior calls just would love to get an update on and on.
And how those initiatives are coming.
Sure. Thanks, Tom excellent question learnings from instant book and past transaction.
On Tripadvisor I.
I would say instant book tour to us.
A lot.
Lot about how to be and effective transaction platform, we did a ton of bookings when instant book was.
<unk> rolled out throughout the site, we did it on a global scale.
We had a lot of partners involved and.
And and we succeeded and delivering a lot.
Bookings were a lot of customers.
And it didn't work as well as we had hoped with instant book was simply we did not offer a compelling additional value proposition to the user as to why they should book on Tripadvisor versus.
There are other choices out from the marketplace.
A lot of it so when we take it forward and look at Tripadvisor plus it it looks like instant book, a little bit because the transaction still on tripadvisor, but the whole message is completely different here, we're talking about on a subscription service to make you happy to make the travelers savvy travelers and getting compelling.
Ailing immediate instant value for going down the transaction path with subscribing to Tripadvisor, plus and getting that immediate savings or that media room upgrade that immediate set of benefits that compel someone to say.
Net.
And this makes it a straightforward choice.
Hi.
Tripadvisor plus may not have the frequency of something like an Amazon prime but we do have that immediate logical benefit of we're going to help you have a better trip right.
Save 200 Bucks you can take the private tour and instead of the group tour fairly straightforward.
We're adding as I mentioned before more of the non transactional components to turn and you into a smarter travel and when Youre actually.
And in destination to help you when things go wrong.
Right now.
And again will be adding more of that or.
So the learnings from instant book, and we know how to do.
We know how to work and the transaction environment and hotels, because we've done it before that's great.
Clearly one of the reasons, we were able to launch the product and such a short time period.
Hi.
Long.
I don't want to.
I want to make sure to mention that we also adept at being a transaction site as we've been filling experiences on tripadvisor for many many years now so.
And again it people may think of Tripadvisor or some people.
And the Tripadvisor is worth you say, but we've been selling travel for for quite some time.
To the second.
Second question on.
More that we're doing and customer with our customer data.
And certainly plays an important role internally as we launched <unk>.
And and have offers are going out to existing.
<unk> members existing contributors folks who.
Already have a relationship with Tripadvisor, we can identify and then as we've shared in prior calls are targeting capabilities and our media business is getting.
And the better and better so we're just able to more effectively create campaigns that serve our advertisers and a better way with the additional capabilities that you've been building into the system some of which have launched other which other pieces of which are still.
And are still and adult.
Great. Thanks for the detail.
Thank you.
Your next question comes from Mario Lu with Barclays.
Great. Thanks for taking the question I have another one on plus and one on alternative accommodations.
So the one on plus I, just wanted to take a step back and.
Talk more broadly about the genesis of the prop.
And just wanted to share your thoughts on why you think tripadvisor is uniquely positioned.
Succeeded with our subscription products versus say traditional otas.
And then secondly on alternative accommodations.
They are continuing to gain share versus hotels within the travel industry. So just curious.
Let's see if anything has changed in terms of your strategy and this category to either ramp up supply or add more partnerships to share more listings and this category. Thanks.
Oh sure.
On route to our two excellent questions. So on the on the plus side that was your first question.
First I will.
We studied the behaviour of travelers on Tripadvisor for for so many years now and obviously people are coming and they're looking they're getting great guidance and then you know our monetization model was.
Advertising on the site and then getting those travelers to leave us.
And in book on supply.
Ta sites.
That work built a billing and <unk> business.
All good but we've always known that there was this notion of the leaky bucket, we're sending folks the travelers a way to book elsewhere.
And many of them do take the trip, but they don't book right away and kind of we lose credit for that.
There's also the notion of Waller meta engine finds a good price for people and it doesn't by definition and find a better price or offer a better traveler experience.
Since then.
And then what is out there than what they used to could find themselves we help them find it easier, but its not unique it's not exclusive and.
There's many other meta players. So we said we thought would've.
Will the travelers want they wanted to have a better experience they want their dollars to go for.
Experience what do we have we have a ton of travelers on our site, taking all types and trips. So we start with that consumer value proposition, how could we provide real discounts amazing perks in a way that the customer isn't able to find.
That value proposition through their other channels through.
Traditional places that they book or through other medicines, and we came up with this notion of well if we put it behind a subscription wall theirs and establish model of being able to offer discounts and.
Perks to folks that are behind <unk>.
Industry problems behind this pay gate.
And.
And could that be a model that works. So we asked first day with the customer be interested in this.
And with our surveys with discounts and perhaps the answer is clearly, yes, and then how could.
Market this product too and audience would we be able to find that with people on tripadvisor will be interested and in this product and as I shared $160 million.
Times, and 2019 that people were building and.
We're interested in and expensive trip interest enough to be clicking off of <unk>.
Could we and our meta auction.
And we picked $750 because when you take a 15% discount on US 750, I will purchase you're recreating it to that.
That our membership price of $99. So.
Can we find the audience to be able to educate about this.
Site.
Product and answers clearly, yes, because they were already on our site.
And then we ask will the hoteliers give us these discounts and perhaps and as explained in the earlier question like yes, because it still has the opportunity to be a lower cost and distribution for the hotelier.
And then the other channels that they use so again and getting the extra visibility on tripadvisor and a distribution cost equal or better than what they are otherwise paying that seems very straightforward from a hotel he will perspective, and we've been signing up hotels. In addition to our Aggregators and signing up direct hotels.
Let's say that sounds great, let me give it a world and we.
We continue to do that with our direct sales force.
And then will travelers be willing to transact on Tripadvisor and as I shared on the earlier question with instant book clearly people were willing to do so and we sell it on and experiences on Tripadvisor. So that's really not.
Sure.
And I E do we need permission from our travelers Tripadvisor is already trusted site and they've already proven that they will.
Go down that transaction flow and.
And again, it's we have this as an additional product on top of our auction the auctions.
Going away and if you don't find the ideal property.
And our set of cross opportunities, there's a beautiful net auction youre already on our site and you click off and and get the exact property that you are looking for so.
Tripadvisor.
And we serve four.
And pre Covid days, we were north of.
And so on 1 billion you use a month you could think of it as we serve.
Billy and travelers a year and if you like.
Savings carefully, but if its only 10 million that sign up for Tripadvisor plus.
And on less than 1% of Ryan and more traffic.
But.
400 million sign ups tons to 100 Bucks and obviously, the math works, who really nicely and are.
Recurring subscription revenue so I don't want to get ahead of ourselves. This is not going to happen overnight. We have a lot of supply and we wanted to go sign up but it is a huge market we have our own tripadvisor channel to reach.
But when they are shopping we're trusted brand.
And.
Post Covid, we think.
On the B the regular traveler is ready to embrace a subscription product subscription products in general have been doing quite well and it's not us but others. Many others have educated.
Consumers on the notion of signing up for for something on an annual basis.
So versus the Otas are supplier and bricks and they're going to win we're going to win its not a one or the other by any stretch.
As I say, our auction will continue.
She will be quite healthy.
But our ability to and the commission that the hotel is ready.
To pay their distribution channel back to the.
And the customer I think enables us to offer discounts and a way that is very hard to match from other.
<unk>.
And your digital channels.
Great and I'm, taking my question.
Hi.
The shorter answer to the second question alternative accommodations, absolutely we see alternative accommodations continued to grow we had a pretty good.
Last summer on our site for rental.
The inventory, it's just a smaller piece of our overall pie and so we do look to grow choice. We do look at some point to be able to.
Integrate in the rental experience into tripadvisor surplus because a bunch of those travelers are also.
Planning planning.
Planning rentals.
And age.
We don't have anything kind of neutral reported at the moment, but please understand.
We are keenly aware of consumers' interest in this type of inventory and the fact that.
We have a hotel auction that gets inventory from lots of different places.
<unk>.
And we have a.
Our rental.
It's not really and auction, but we have a rental display that also gets inventory from multiple sources and we do look to expand that over time.
Got it very helpful.
Thank you.
I would add to that is underlying what Steve is saying here about the fact that we have a.
Broad platform.
I will state, including rentals, but I also want to point out that the.
And this pandemic the rental business has benefited because of the travel trends that were specific to the pandemic of course, some people making more.
More local trips not trying.
And by car and offline and so.
Although the spin and important.
And development. This year, there will be some degree of reversion to be Independencia is gone and people start to feel comfortable flying again feel comfortable staying in hotels, so I wouldn't.
I would caution to overestimating the trend for the long term.
Thank you Beth.
Your next.
Question comes from Jed Kelly with Oppenheimer.
Hey, great. Thanks for taking my question one on plus and then just one on current trends.
So just on Tripadvisor plus Steve Ernst.
How are you thinking about having enough supply or what execution you need to do.
No.
Prevent like and a natural churn issue and.
And then like will you actually.
And it's heart like like when Youre about to book a hotel will that's when like the plus option might come up and pay.
And $99 you can save on plus and then just real quick on current have trended.
We've seen cases have on diesel.
And here the U S. I mean have you seen an improvement over the last couple of weeks and and traveler interest.
Oh, great. Thanks did the perhaps I'll take the plus one and turned to Ernst or from the recent trends.
No question.
And just how are we thinking about supply avoiding and natural churn.
It was the natural churn on what are you thinking on the hotel side or on the customer side, the customer side right. Okay. All right yeah.
So I, yes.
Yeah, what we're using.
And it tends to the supply side first.
We're using kind of traditional discount aggregators to bring 100000, plus properties online quickly offering discounts and other PERC aggregators where are they.
We've already negotiated with the hotel to get.
<unk> timber full set of perks and make these properties really kind of stand out from the rest and that's been our launch.
And have been signing individual hotels with our direct sales force. Unfortunately for US, though we have you know call. It 1 million plus pieces of lodging on our site.
A way there there's there's a popular and head to that if you will when you look at where people are playing the expensive trips that listener was down quite a bit and.
And we're using our direct sales force to call into those properties tell them about plus.
Sure.
Easy decision that we think it is for them to give it a try we don't look for long term contracts, we don't look for guaranteed.
Every room is discounted.
And they can too.
And then.
And the channel to meet their needs are being able to get.
On a more reservations.
Sure.
When we think about the question on churn.
When you.
And you're in the debate and mix, you'll see that there are lots of hotels that are available from plus it's not a majority or anything like that but in most cities, who will fund simple choices, we look to expand that tremendously.
And of course with more partners and more direct sales.
There's no challenge and availability right now so plenty of opportunity to meet the consumer demand.
When we think about churn we think.
Yes when.
Purchase and the insurance, we think the traveler looking out of city and going to.
Im going to Miami and looking at hotels, Oh. This is a plus property because I see it as being merchandised with a discount on a per affect log in to see what the actual discount.
And I can't.
Transact on that discount on less.
Unless I buy the trip subscription along the way of course at any point and click off too.
To a traditional O T, a and and pay that right, but the tripadvisor plus rate.
Yes.
Is better and that the discount.
Can't we're offering and that's the reason and the hotel got to be at the.
Top of our short list.
So it's a compelling in flow opportunity for us to market Tripadvisor plus and.
And then presuming the customer buys there are good for a whole year and so they come back and they see a lot more.
Discount opportunities to save money with any hotel purchase that theyre, making based on the discounts and the perks that we have they get their 10% off attractions and and and the rest of the benefits.
Even though I keep talking about how most plus subscriptions are paying for themselves and their very first purchase.
More and we fully expect the people that are buying plus.
Multiple trips over the course of the year and every time they were taking that additional trip, it's a pure savings moment for that and perhaps at the end of the year, we remind them hey, it looks like you booked six hotels with us here's the Grand total you saved.
$872 time for the $99 renewal trying to make that very much a no brainer moment when it comes to renewing tripadvisor plus for next year.
So.
Obviously, it's a subscription business there will always be some level of churn.
<unk>.
The target audience here, he's taking more than 150 year, they're already saving the day.
The cost of the subscription in general in that first purchase so it doesn't take much to.
And I ask that traveler do you think youre going to take at least one more trip over the coming year answer.
Yes, and they've had a great experience the first year away we go.
And Jeff to your second question, Yes, we did see January January sort of start softly, but February and improve.
And.
Revenue pick up more than we usually see from January to February.
So that's positive.
Scene.
A market increase of the searches for 90 days plus out versus what we had seen and the three months before so that was something that.
And.
And it gives us some some positivity there and so we.
February.
Murray is starting off so far better than.
And we expected or.
And we have seen and in January but.
But its very mixed across the businesses as you can imagine.
And the U S. As it has been actually doing reasonably well we called out from January we had in our hotel auction and North America was roughly 50%.
Of the of the year before where Europe was much much lower and so we've seen.
The difference play out between the U S with relatively few travel restrictions in place versus <unk>.
Europe, we just see that in our and our numbers and so we're looking forward to.
And restrictions hopefully.
With the rollout of the vaccine and hopefully with the subsiding number of cases that we are seeing right. Now also have to start to apply and Europe over time and.
And see some of these trends coming from improve.
Improved both in North America and in Europe.
Thank you.
Your next question comes from Eric Sheridan.
And with UBS.
Thanks, so much for taking the question.
And I won't ask any more plus.
Talk about that.
But generally pivoting doctors from the.
And the scope and the Youre working do you on the recovery and you said you didn't give us about how you think where you sit in the broader.
Our marketing funnel will play out as demand starts to pick up again, and whether you will be a leading or lagging indicator on how conversations continue will emerge with your advertisers.
In terms of how they might utilize the platform on the other side of Covid versus the Worldview we're in.
2019, and earlier and then go.
Moving to the local and experiences side do you think you need to do a lot there on either blowing the inventory scale or letting.
Travelers and consumers know that you have those offerings out and a marketplace, where do you think it's just a function of and demand opening back up and just see recovery and those businesses coming on over the next couple of years. Thanks.
Thanks, guys.
Great.
Thanks, Eric.
Two excellent questions and there so.
And its scope and the recovery I E.
Very good question and very tough question to answer and we certainly have seen traffic on tripadvisor.
So we are planning or thinking about trip not go down nearly as much as travel actually went down so in that sense.
A leading indicator that people still want to travel there still searching theres still coming back or are you you drop unique user drop again lot less than our revenue.
Dropped because they're not yet booking but.
Think of it that their.
And they are dreaming.
So as we.
We predict as we hope.
And the second quarter as people.
Certainly in the U S may have their vaccination dates schedule they would get more excited.
Planning that trip knowing that they will be vaccinated on on X.
And one day.
And so I think we'd be a good kind of leading indicator from a marketing perspective and businesses that want to get in front of those customers. When they are thinking about that that's.
And we're trip.
I would argue would do wise to leverage the eyeballs that are on our platform today in the and the planning moments.
Hi.
Yeah.
Ernst do you want to add something to that.
I would add maybe if you look at our business line by business line.
About <unk>.
Last year is that restaurants actually has adjusted and much more quickly than than the rest of the business to improvement.
In Q3.
When restaurants will open and in Europe, our business was straight back to the 2019 levels and in some countries actually above.
So I expect that line of business to do better experiences has been lagging.
And is likely to lag in the recovery.
And then if you look for instance at our hotel auction.
Me because from a revenue recognition being being different than that and O T. A model.
Will we may see revenue earlier than Otas Macy revenue.
Ignite revenue on the actual click and Otas recognize revenue broadly on state and so.
So that may be an early indicator for us or them.
Rather than a laggard and our business.
And then on.
Thanks, so much.
And experiences.
Our question is to the supplier and awareness or just the demand at the moment. It's certainly just a demand question and there aren't enough people, taking those leisure trips looking to do that exciting activity are the windows.
And if it's do rebound.
We feel for our core audience in AR and in Western Europe, and the U S. We think we have and most of the supply that we need to constantly adding more but.
And we don't think of it as the supply throttled.
And I were.
And you should to build up the demand and build up the.
And the sort.
Inspirational quality of what we are presenting and things to do in these tourist destinations.
Because that's between Viator and Tripadvisor will certainly have we feel we have enough eyeballs we have enough.
Looking to taking the types of trips where they should be booking experiences.
But we need to help them make that commitment to book it online as opposed to wait and book it.
And destination.
It's a different answer if you reach all the way.
Traveling to Asia and in terms of the supply question.
But for our core markets I think it's mostly traveler getting back to take the trips that include experiences I E. Nobody in the U S is headed to the attic and right now to get the amazing tours and the museum's there when that comes back.
And it will be more than ready to go.
Thanks, so much from a total guys.
Thank you.
Your next question comes from Kevin Kopelman with Cowen.
Great. Thanks, a lot.
Quick follow up could you talk a little bit more.
Well the initial learnings from the beta test.
On plus and what kind of conversion rates and initial conversion rates, you're seeing and what's a realistic goal over time. Thanks.
Sure.
And that of course is why do we do a beta we look to learn.
Learn.
And it's out to a decent portion of our U S. Traffic. So that we're getting daily subscriptions were watching where we are in the funnel and it's too early to really talk about.
The conversion rates on where we're at and we don't honestly know what's the right.
Target is we certainly would hope that the discount and the PERC would generate a pretty compelling reason to go into the funnel can save $300 share that's pretty exciting and then again, we have the content from the hotels, we're making the transaction.
Yeah.
Fairly straightforward, we're happy to store your credit cards and make it easy to come back.
And then knocking down all the reasons why people either get stock or Theres extra friction and the flow.
Core value proposition.
Early check in on late checkout, I get a play room.
And saving $200. This sounds like a really simple reason to book on Tripadvisor to subscribe to Tripadvisor plus.
And that's sort of if you will replacing a user was going to click off.
Room.
The hotel site or for no Ta for just that particular trip and we feel like it's a better value for the traveler to book that Tripadvisor plus offering.
It makes economic sense for us and the hotel is happy because it's a less expensive distributions.
Probation channels so again.
And then win win all around and.
And.
And we will be out of beta relatively soon.
As.
We look to expand the opportunity to both learn faster and just.
I hope more people start to realize the benefits of trip plus.
And advance the peak summer travel season.
Excellent and then.
And as you think about the.
And 160 million shots on goal.
Can you give us a sense of how much is that on your kind of overall.
Hotel traffic.
Or a hotel at revenue just to give us a simple on that.
I don't I don't offhand know, but in a sense you could take all of our auction.
And you take a guess at our CPC and do some backwards math in terms of how many total.
Or fix over the course of the year, we might be generating.
Hi.
Of course, most of our travelers that are on our site for all the sets of reasons.
And we're looking for what I might call the ordinary trip.
Staying a couple of nights here.
It's athleisure has have business trip visiting Grandma, there's lots of different reasons why people will be taking a trip.
And the Tripadvisor plus offering is really it.
And it can be effective for those small trips if we wanted to upgrade but then there's that kind of and $99.
Chris we're clearly targeting at least initially on.
On the bigger trips will longer stays and that's why we shared this 160 million number to help folks SKU.
And I give you all the confidence that we have that says we have a.
A lot of travelers on the site already planning trips of this scale and so.
Obviously, we look.
Look for it to be.
Incremental revenue to us.
And recurring revenue being.
On Fabulous part of.
Of the overall offering.
Hope that helps thank you Steve.
Your next question comes from Lee Horowitz with Evercore ISI.
Great. Thanks for the question two if I could maybe sticking with plus.
And appreciating that this is not necessarily a product that can only when and if the otas lose by extracting the hotel discount via the hotel hotelier and distribution costs. This would seem to put you in a more direct competition with the otas and suppliers and how.
Are you thinking about the potential management of this tension point with important advertisers on your.
And then maybe one on experiences and building on Eric's question, a little bit and thinking through experiences in the recovery would be experiences industry likely acutely impacted by Covid do you expect that you will need to spend more aggressively on sales and marketing during the recovery to bring on more experienced supply to offset what I would imagine.
And would be a lot of experiences suppliers, who have gone out of business during the crisis and in your experience. What is the lead time between investing and that sales and marketing channel and on boarding and experiences supplier and getting them up to a meaningful bookings on the platform. Thanks for the time.
Sure.
And.
And plus question.
And thankfully again to two good questions there.
Hi.
It it it's fair at the highest level the thing Hey will it's somebody who's booking on Tripadvisor and that.
It ends up kind of being a supplier direct booking and.
And that's a booking at the Otas wouldn't get.
Technically true, but the volume of these bookings compared to the volume that.
Our big claimed Otas will see it's a little hard to believe that it's even noticeable unlike instant book.
And did have otas participation.
Tripadvisor surpluses and does not for the vast majority of our audience, whereas the instant book plan. It was for the vast majority of the audience instant book, we were looking at one night hotels day is convenient and booking on the phone so.
And a sense that was.
On a potentially more competitive move again part of why it took a little while for the for the Otas to join on them.
But as I.
As we evaluate client reaction from the Otas with this.
And they just put it in a.
Which it from ballpark. This is a very gated product and discounts behind and paid gates are extremely well established and.
Travel industry and.
What.
And what could be a very big opportunity for Tripadvisor.
It still isn't necessarily.
And it's been a rounding error for from Big online travel agencies. So we don't foresee that being.
And the issue at all frankly.
Two weeks variances question.
Yes.
Ernst do you want to and comments on the supply side.
Yeah.
We don't see this as an investment and big investment push it to supply different and we would normally have as the market recovers.
<unk>.
Have a lot of supply and overlapping supply in many markets multiple providers if the circumstance.
And many markets.
And even if some of them will go out of business, we don't think that will be.
And it will be particularly harmful to our overall offering to the consumer. Moreover.
There are a number of historically high revenue venues like cosmetics.
Cosmetics, Michigan, Nevada.
Service and war or the sub rather from evi, and Barcelona, or the Louvre specials mover tour in Paris that are not likely to be.
And not returning and then.
And are likely to return a win win.
Travel to see if it happens again, so we are not that concerned about that overall.
And thinking.
More about how do we catch the wave from a marketing from a marketing to consumers perspective.
And the when the market comes back more than what we need to do for our supply base.
Helpful. Thank you both.
And our last question comes from James Lee.
We will see a house.
Great. Thanks for taking my questions. Two here are Steve, giving you will focus on subscription.
And maybe can you talk about any changes to your view on the hotel meta search product over the longer term.
Should we think about the overall strategy from a consumer.
And with the view is it more of the segmentation strategy.
For example for high ASP traveler, it goes to subscription and maybe for mass market do we want to still focus on meta search and also secondly on trip plus again.
I'm sorry about additional questions here.
Appointed dwindle.
Do you and your testing here just curious what you're learning is on that specifically do you think the demand that you're seeing from people signing up is that incremental or do you think there's some sort of substitution effect coming from other travel subscriptions.
Yeah.
Sure.
Thanks, so much for the question James.
Okay.
I you can take a look at kind of what we're doing right now on the with plus with respect to Meda and that we're really trying to market plus where we think it's the where were making.
And the easiest possible decision for the travelers. So for instance, even where we might have a discount on a property.
That discount is only call it $25 and the subscription is $99, we're choosing not to push the consumer towards.
And as Tripadvisor plus at that point, because it's a little bit.
And maybe what the consumer wants, but we don't want to push too hard with the value proposition isn't as compelling.
And where the consumers going to save a $150 sure. It makes a lot more sense for that consumer to buy.
By Tripadvisor, plus then clicking off on some of our meta auction so.
In our merchandising on the site, yes, we are segmenting our audience in terms of how hard we are pushing plus or how much we're choosing to market plus to those different segments.
It's likely to change.
And over time over years as cluster becomes more well known as people come to Tripadvisor, Hey, Tripadvisor plus how can I see more availability as we otherwise segment travelers into very frequent travelers will maybe that traveler.
Perfectly happy with the $40 savings because they are going to take five trips over.
For the year and they know that and we know that and so we have a marketing message. It says think of all your trips you were taking it clearly.
Pays for itself to the degree that we also learn and can use the data we have in house for.
Folks who are less price sensitive and more.
<unk> did in the.
And the upgraded experience.
And opportunity to push the perks as opposed to the discount to that audience.
We think our medisoft is going to be around for long long long long time and.
And plus complements that.
So when we think of.
Perhaps a typical plus user.
And found a great deal for this wonderful vacation and excited about the upgrade.
And where the fruit plate.
Take that trip and now the next time, they think about traveling well I'm going to start on Tripadvisor.
And looking for that similar thing maybe not with the same amount of discount, but maybe this particular hotel they are interested in or whatever reason location or reputation or.
Furrow isn't.
It doesn't have a plus offering at that moment in time.
Hi.
Well, great. They came to Tripadvisor and their next step is to go click on a meta auction link, which also helps us monetize the consumer and get that traveler to the hotel that they want to book.
And that hotel happens to be on expedia or booking dot com or our supplier direct so.
Hi.
I don't view, it as particularly cannibalistic.
Plus as a wonderful engagement vehicle.
Get to a meaningful enough number of subscribers.
And then final point when I look at the rest of what.
Tripadvisor core team is working on it is about building more.
Instrument on our platform.
Getting more visitors to become members members to become engaged members and eventually some of those engage members will certainly become paid members plus members with all long that funnel, we're building more waste and could come back to Tripadvisor and one of the key ways.
And Gabe monetize that traffic is through that traditional hotel auction and hotel auction's working beautifully our clients continue to pay what we think of us as fair prices for.
And so the traffic that we're sending them there was kind of there's nothing wrong with the auction except it was pressured at the top.
As we bundle and how.
And how much traffic starts looking for their hotel on Tripadvisor and to the degree that our.
Visitor to member a member to engage member.
Programs are effective we're able to get more traffic back to Tripadvisor, which we know how to serve quite well.
Half of the day.
Second question on <unk>.
Testing learnings.
Hi.
Uh huh.
Sure.
To our knowledge there aren't other travel subscription products, we could be kind of pulling from so.
We feel.
Our our current testing and and the product rollout is pulling people that hadn't really thought of doing a travel subscription product.
Relatively new concept and saying Hey, this is worth signing up for because on getting the benefits on giving the perks and getting all.
Feel a whole year.
And maybe a first of but it will.
Sports is first of a kind subscription product because of all the different categories. We cover.
But to the consumer I don't think they're looking for a travel subscription product I think they are looking to have a better trip and by signing up for.
The script from product, that's the way that that theyre going to achieve that objective and they might take that savings.
From the hotel and apply it to spend an extra day on vacation.
Great with us.
They.
Enjoyed the benefits and the subscription immediately.
Great. Thank you.
Thank you.
There are no other questions at this time and will now turn the call back over to Steve Kaufer.
Well, thank you all and thank.
Thank you all very much for joining our call.
Time and time again travel is rebounded travelers have come back to trip.
We will continue executing our strategy and ensure the tripadvisor plays its rightful will lessen and influential adviser.
Travelers and the businesses throughout this upcoming recovery.
I want and again, thank our employees, our tripadvisor customers worldwide and our shareholders for their support and partnership.
Great and 2020 and for the years ahead.
So thanks, everyone and please stay safe.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
[music].
Yes.
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John.